Auditors: Erase deficit, don't cut sports or activities

WOONSOCKET — City officials released an accounting report this week that says the Woonsocket Education Department is capable of erasing a projected $1.5 million deficit without touching sports, music or academic programs, but Schools Supt. Robert Gerardi isn't so sure.
“To me nothing is clear at this point,” said the superintendent. “It's a good job by the auditors, but it might be overly optimistic.”
At issue is an interim report by the firm Bacon & Edge, a company hired several months ago on orders from the state Department of Revenue to perform a forensic audit of the WED's books as part of a wide-ranging plan to address the city's fiscal instability.
Though the finished product isn't expected until December, the company has already concluded that at least $1.3 million of the gap is the result of inaccurate estimates for projected receipts or expenditures in three areas:
• Turnover allowances. These are projected savings normally budgeted to account for personnel attrition due to retirements, deaths and resignations. Often, these personnel can be replaced at lower cost. B&E said the WED underestimated the savings by at least $463,000, and possibly by as much as $750,000.
• B&E says the WED's budget overestimates health care premium costs by about $63,000 a month. The company says if the savings continue for the entire fiscal cycle, the total could reach $755,000. “B&E's experience is that claims will increase in the winter and as the school year moves along. However, B&E expects that the savings will be at least $400,000,” the company says.
• Medicaid reimbursements for special education students. The federal allotment has not only been trending higher since 2009, B&E said, but the education department
See AUDIT, Page A-2
has hired personnel to capture a greater share of Medicaid money. Thus, the WED should take in at least $400,000 more than it budgeted for this line item.
The $1.5 million figure has become a major bone of contention between the administration of Mayor Leo T. Fontaine and the WED of late, with both sides embroiled in Superior Court litigation over school spending. Fontaine filed suit against the WED last month, arguing that it is in violation of a state law that forbids education departments from deficit spending.
Poised to borrow $12 million to erase years' worth of accumulated deficits, and with its bond rating at junk status, the city simply cannot absorbing another WED deficit at the end of the fiscal year without risking a state takeover, the administration argues. Finance Director Thomas Bruce has already taken emergency control of the WED purse strings, but Fontaine says he pushed for the lawsuit because Bruce was unsure whether it's legal to approve any vouchers for the education department under the circumstances, regardless of how vital they are to running the schools.
Until a couple of weeks ago, the WED was saying it had achieved a balanced budget – or at least the $61.3 million budget that was submitted to the council in June. It was later discovered that the figure was improperly inflated by $1.5 million because it hadn't been adjusted to reflect cuts in state aid that were made after the City Council adopted the budget. The real target school officials should have been aiming for, city officials now say, is closer to $59.7 million.
School and city officials have traded charges and countercharges over who's to blame for the miscue – the schools point the finger at Bruce, but Fontaine says Bruce was merely working from figures the WED provided to him before the budget was introduced.
B&E issued a letter on Oct. 16 in which the company addresses the rift and concludes that no one is to blame for providing misleading information. “The local revenue is best estimated by the School (Department) and it is reasonable that the City used the same amount for the local revenue,” B&E President Walter Edge said in the letter, addressed to the mayor. “My conclusion is that neither the School (Department) nor the City made errors in their representations or calculations of the total revenue available to the School (Department) at any point in time.”
How the interim report will play into the legal dispute remains to be seen. Outside lawyers hired to handle the case, including Daniel Kinder and Joseph Larisa, were expected to turn over the information to Superior Court Judge Bennett Gallo on Wednesday during what was to be the third hearing in the lawsuit.
“All we want is for the court to tell us if the school department is operating with a balanced budget,” Fontaine said.
The mayor seemed to think the B&E report was good news for the education department, as it suggests that it's possible to balance the budget without affecting children's programming.
But Gerardi isn't necessarily buying. He says it's still unclear whether the judge will order the School Committee to make further cuts in its already barebones budget.
The superintendent is also less than convinced that the WED can erase a $1.5 million hole in its budget with a mere stroke or two of Business Manager Stacey Busby's pen, as B&E seems to suggest. For one thing, Gerardi said that B&E's projected savings on health care are not supported by long-term historical trends regarding catastrophic illness, including the incidence of cancer.
Also, he said, the turnover allowance is a highly volatile figure. While there are often savings that result from hiring less-senior workers to replace veterans who die, retire or resign, those savings are sometimes eaten up, and then some, by unforeseen changes in enrollment patterns or other contingencies.
For example, Gerardi said, within the span of a few days recently, the district was forced to take in 11 new students who all require special education plans. The WED could not accommodate them all without adding a teacher to the payroll.
“The report is saying the auditors have identified additional revenue and additional discretionary expenses,” he said. “There are some points of agreement, but at this point we're not certain all of these adjustments can be made.”